Insurance Information

December 5, 2008

According to Maurice "Hank" Greenberg, the former American International Group Inc. CEO, the company could quickly fall apart if management doesn't come up with a unified recovery plan.

He said Thursday in an interview that it is not possible to maintain an organization that is drifting in the way this company is. He said that if action is taken now the company can still be fixed. He added however, that this may not be the case two or three months from now.
This most recent criticism of AIG's management, included Greenberg’s statement said AIG executives were at cross purposes.
CEO Edward Liddy has reported that the company will be holding on to AIG's global property casualty insurance operations, as well as their stake in some of its well known Asian life insurance operations.

AIG, which at one time was the world's largest insurer, is planning to let go of some other units in order to help pay back a $152 billion rescue package that it received from the U.S. government so as to avoid a financial collapse last month under the threat of bad mortgage bets.

In an interview with the Wall Street Journal, last week, the individual hired in October, to oversee AIG's restructuring, Paula Rosput Reynolds, said that if necessary, she would sell off every part of the company to repay the government.

Greenberg said of the plan by Reynolds, former CEO of auto insurer Safeco, that this was an outrage. He says that this is sending a message for everyone to start looking for a new job which would have the affect of curtailing the company’s business. This he says, is even worse than just cutting back the company’s size.

WHAT'S UP NEXT?
In the midst of an accounting scandal, Greenberg was forced out of AIG in 2005. He warns that more revisions are necessary for the government's rescue plan to avoid the insurer reaching a state that is beyond repair.

Before the U.S. bailout, Greenberg and the companies he controls, which include C.V. Starr and Starr International, were AIG's leading shareholders, giving the government a 79.9 percent stake in the New York-based company.

He said the government if it wants AIG to survive, needs to guarantee contracts AIG wrote to cover mortgage debt, in addition, to cutting its stake to one-fourth or less. Greenberg says that the guarantees, as opposed to cash, should be similar to the ones extended to Citigroup. In this case the government would cover most of the losses relating to about $306 billion of the bank's risky assets.
Greenberg stresses the importance of having a plan C or a third revision to a bailout first put in place in September.